Credit Cards Vs. Insurance Rates
Are insurance rates really affected by credit cards? Some think that is a ridiculous notion. The thought that the two are even remotely related is absurd; isn't it? How can paying credit cards late, having too much credit card debt, or even a delinquent credit card bill affect your insurance rates. Well, let me tell you how.
What many consumers don’realize is that in numerous states, insurance companies have been allowed to examine your credit. The legislature has passed bills that give insurance companies the right to examine your credit score to determine rates, and even in some cases deny coverage altogether.
Supposedly, the argument by insurance companies has been, that if a consumer pays their bills late, or is delinquent on their bills, or is irresponsible in accumulating too much debt, then the consumer is obviously irresponsible in all aspects of life. This would theoretically include, bad driving and being delinquent on insurance payments. This in turn; as they argue; causes the insured to become a high-risk driver.
What’s most fascinating thing about these laws, is that in many states, they require consumers to purchase a minimum amount of automobile insurance. Many states can impound your vehicle, issue hefty fines, or even jail offenders who refuse to pay for mandatory automobile insurance.
Okay, so what if you have such a bad credit score, that you can’t get automobile insurance? Hmm...that’s a good question. In the states that force consumers to buy automobile insurance at rates that are determined by the insurance industry, based upon your credit rating, there are usually special state-run insurance programs that are for high-risk drivers and consumers that have bad credit score. So if a consumer can’t attain automobile insurance due to bad credit, then they would be labeled as high-risk drivers.
What is a high-risk driver? A high-risk driver, is someone who has been convicted of driving while intoxicated, driving under the influence, vehicular manslaughter, drug possession, or it could just be anyone who has an excessive amount of traffic tickets or numerous accidents on their driving record.
Let's get back to the initial question: “How do credit cards affect your insurance rates?” Answer: Too much credit card debt, too many late credit card payments, and any credit card delinquencies on your credit report, and you’re looking at a hefty insurance rate.
About the Author
Bryan Pringle, Ph.D., is an author that has written many articles on the credit industry. For more info please visit: http://www.apply-forcreditcards-online.com
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